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Tech bulls look for fireworks in July

For the second session in a row, optionMONSTER's Heat Seeker monitoring program detected upside call buying in the SPDR Technology Sector exchange-traded fund. Early today traders purchased 3,800 Weekly 39 calls expiring July 25 for $0.28. Almost an hour later, they came back and snapped up another 3,800 contracts--this time even shorter term: the 39s expiring at the end of next week, for $0.11 and $0.13.

Volume was well above previous open interest at each strike, which indicates that new money was put to work on the long side. Yesterday, traders bought the standard monthly July 39 calls for $0.17 and the Weekly 39.50s expiring on July 25 for $0.10.

Long calls lock in the price where investors can buy the fund's stock, letting them cheaply position for a rally, but the contracts will quickly lose value if the shares pull back. (See our Education section)

Given the timing, it's possible that the call buyers are looking for a positive response to Alibaba's initial public offering. Analysts have been raising their estimates for the value of the Chinese e-commerce giant, of which Yahoo owns 23 percent.

The XLK is up 0.13 percent to $38.79 in afternoon trading, within pennies of its highest price since the dot-com bubble was collapsing early last decade. It's been coming back to life in recent weeks after struggling in the spring. During that season--between March 20 and June 20--the fund rose 4.7 percent, lagging the S&P 500's 5.5 percent gain.

Total option volume in the XLK is almost quadruple its daily average so far today, with overall calls outnumbering puts by more than 300 to 1.